The PESTLE analysis is an acronym for the all-round macro-level study of external factors which can and do affect a(ny) business. This study makes account for those factors that may either benefit or hinder the efficiency and smooth functioning of an(y) organization. These factors are political (P), environmental (E), Social (S), technological (T), legal (L) and environmental (E). The PESTLE analysis is also spelt as PESTEL. Sometimes the last two factors, that is legal and environmental, are not taken into account whereby referring to this study as simply PEST.
Unlike the SWOT analysis, the PESTLE is a study of the external factors only of the market and prevailing conditions which can help the company or organisation gain a feel of the same. These factors are analysed and assessed so as to understand how these external factors, which are beyond the correction of the organisation, can directly or indirectly affect the company and its functioning. This helps in adequate planning and marketing so as to assure maximum overturn.
The PESTLE study is carried out especially at the start of a new venture and is reviewed form time to time (yearly or bi-yearly). This analysis helps an organisation select and understand their target groups and its demands, develop a business blueprint as well as work on their competitive advantage over their competitors. This in turn helps the PESTLE study become more engaging and broad thereby forming a vicious circle. The more detailed the study is, the better it is for the business.
Aside from gaining positive realisations, this perusal can help avoid many errors, big or small. It helps the company overcome factors which act or may act as hurdles in their path to success. This requires the identification and assessment of factors which might be affecting the position of a business or company, reasons for growth and especially decline and setbacks.
Since the PESTLE survey is such a comprehensive and expansive study, it helps the company and its employees remain up to date with the latest developments and trends in all aspects of concern such as government policies, legal systems, tax policies, growth rate, new technologies and environmental laws to name a few. For example, if a company is branching out to another state or country, they need to re-examine their policies and activities so as to fit the legal framework of the new location.
Reassessment is a major key to avail the maximum benefits of the PESTLE study structure. Irrespective of the company’s performance, the external factors are always in momentum. Sometimes these factors act and affect the business(es) independently or in combination. Sometimes these factors may affect each other which require a large-scale reinvestigation on behalf of the larger bodies governing such factors for example governments, NGOs, trade unions and international organization. Thus it is imperative for any business to keep updating their systems from time to time so as to stay at the top of the game. Since external factors cannot be shaped by them but what can be done is that they adjust their structure in such a way that the external factors (largely) are in their favour.
Like the SWOT analysis, PESTLE also requires extensive and intensive brainstorming from all sectors of the organization. This helps not only in team-building and creative thinking but also helps brings together various sections which may not otherwise be interacting with each other. It also makes room for the employment and opinions of analysts and specialists from various spheres which thereby encourage employment and creation of new jobs.
The SWOT analysis is a study undertaken by a company or organization to study the framework of the same. The entire functioning of the organization is analyzed by studying it from various perspectives so as to identify possibilities and problems and therefore design their course for the future. The SWOT analysis is a framework which is used to assess a company’s position vis-a-vis competitors in the market by studying and identifying their strengths (S), weaknesses (W), Opportunities (O) and threats (T). Strengths and weakness are internal factors where as opportunities and threats are external. With some thought this perusal helps uncover a range of options that are waiting to be utilized. When this same combination of words is re-arranged its acronym spells out TOWS.
The SWOT is the theoretical analyzing aspect of the study of these external and internal factors and how they affect a business or venture individually or in combination of two or more factors. After the SWOT analysis has been performed, the next step requires a practical application of the data accumulated during the study so as to use and apply it to a working model. This derivation of the strategic applications from the audit and analysis is referred to as the TOWS matrix. This matrix is a vehicle for selecting options and strategy generation and planning the future course of action.
This approach and methodology for the future plan of action is subjective in nature to a business or organisation. It is imperative that the organization remains specific and focused on diluting the grey areas which have been highlighted in the SWOT study. It is also important to look into new mergers, product development, innovations and capturing new markets while planning the road ahead.
This TOWS matrix follows a 4-fold approach in the planning process which we shall discuss here.
• Strength/Opportunity (S/O): This approach requires that the organisation make use of their internal strengths so as to make the most of the external opportunities available to them. This is referred to as the “maxi-maxi strategy”. This is the brightest aspect of the entire planning process and must be exploited as far as possible for a successful overturn.
• Weakness/Opportunity (W/O): This crossover requires that the internal weaknesses of the organisation are eliminated or at least minimised by using the external factors that are working in their favour and avail the opportunities. This is the “mini-maxi strategy”.
• Strength/Threat (S/T): These are the strategies that used so as to put the internal strengths into action so that the external threats can be handled effectively. This is the “maxi-mini- strategy”.
• Weakness/Threat (W/T): Since this is an aspect that brings two negatives together, it is referred to as the “mini-mini strategy”. Here strategies are devised so that the internal weaknesses and external threats are both reduced as far as possible. This is the inevitable slump that every organisation or venture may face during their planning process.
The TOWS Matrix is represented by a 2X2 grid just like the SWOT analysis.
The TOWS matrix is the second step in the planning process which follows after the SWOT analysis. Much like SWOT, the TOWS also requires a timely re-investigation so as to keep the organisational machinery well oiled. Since the study is so thorough in nature, the TOWS matrix also makes place for alternate strategies as a back-up course of action in case the first fails for any reason(s). Analysts and specialists are employed for this purpose so that the best result can be sought.
The SWOT and PESTLE analytical tools are effective studies which are undertaken at the start of the venture to obtain a 360 degree view of the project at hand and its external environment. These studies are undertaken so that before venturing into a new territory a pan-optic macro and micro economic level survey can be done so that the business plans and consequent strategies can be devised accordingly. There are several advantages for carrying out the SWOT and PESTLE analyses which we shall look into here.
Firstly, the SWOT and PESTLE studies together offer a complete overview of the internal and external condition(s) of the prospect project or business thereby giving the planners and organizers a good theoretical and working knowledge of how to proceed with the same. Once this has been secured, the business planners and strategy developers can go ahead and design their blueprints and course of action to be followed.
Secondly, since the SWOT and PESTLE studies provide such an extensive inspection of various factors that may positively or negatively affect the venture, in the end it leaves very little room for mistakes to be made. This especially removes the risk factor of the “unknown” to a great extent. For example, with changing governments, policies and laws change in accordance to which the people and organizations must act. Therefore, via the PESTLE analysis, when this knowledge is at hand then the planners can go ahead and make the required changes from time to time.
Thirdly, the aforementioned analyses create dialogue and discussion among the various legs of the organisation. It brings together all members, employers and employees together for an open deliberation where anyone and everyone is welcome and in fact, encouraged, to let their concerns be highlighted so that they can be effectively tackled. They may also voice any new developments they may know about in the factors of the external environment. This unhindered dialogue is necessary in any group for effective working and marinating a well oiled machinery. This exercise also encourages teamwork since members from all sections are required to work with each other.
An important feature of these studies is the fact that they are redone from time to time. This helps companies and organisations stay at the top of their game. These periodical reinvestigations are helpful in because they help get rid of the problems that grow through within time both within and without the business.
Since, the two studies are free, these are also cost-effective programmes which offer much more than they ask for. All that is required is time and open conversation where quality discussion can take place for good result which will benefit the organization or business. In case experts are employed to lead such discussions, employment is generated.
The SWOT and PESTLE are like periodical evaluations and re-evaluations which all organisations, not necessarily business bodies, go through from time to time. This overall big picture helps to recognize their abilities and available opportunities and their shortcomings and thus act accordingly to capitalize the former and negate the latter to the farthest extent possible.
The SWOT and PESTLE analyses are effective study tools which are employed at the time of undertaking or planning to undertake a new business venture or new project in an already-established business. These studies, individually and together help to plan a project successfully by conducting an all-encompassing analysis by looking into various factors, internal and external, which may directly or indirectly affect the project. Thus, conducting this analysis helps the planners to gain a broad and full picture of the project at hand so that strengths can be capitalized and problems minimized.
The SWOT for example looks into both internal and external factors such as weaknesses and threats respectively thus giving the planners a 360 degree overview of the venture from within. PESTLE on the other hand looks at external factors only such as environmental and political which study the sub and superstructures on which the business or project will be based. It offers a bird’s-eye-view from a macroeconomic point of view. They are used while preparing a business plan. Although each of these two inquiry tools are quite effective on their own, for best outcomes they are both employed together. Generally the PESTLE follows the SWOT analysis.
After obtaining good background knowledge of the project and its influencing factors, the business plan can be made accordingly. For example, if the project requires the creation and production of a new kind of product which is an upgrade on a pre-existing model, the business would require the knowledge of the latest and most advanced technology available for the production of the same so that good quality product can be delivered at the effective costs. Also, product update requires a technological update almost by default. For this, research not only on the goods being produced but an update on technological advancement is also imperative.
The SWOT study points out the internal strengths and weaknesses of the project or business. When this knowledge is made available, the next step follows that these strengths must be exploited to the full and used in a manner that the shortcomings resulting from weaknesses are minimized. Similarly available opportunities can be exploited and threats avoided.
Thus the wholesome knowledge provided by SWOT and PESTLE is desirable for any venture. When one has information about something it automatically becomes easier to move ahead with it. Similarly, the SWOT and PESTLE can be viewed as the background research required before starting with a project of any sort. This is especially helpful because it takes away the problem of the “unknown” and thereby helps avoid unknown or unforeseen problems or risks.
Both SWOT and PESTLE are cost-free exercises that bring together all sections of the working organization for a brainstorming session. The questions and answers are all to be found within the group. These analyses are a practice in creative thinking, addressing problems and seeking solutions, developing strategies and very importantly, teamwork. It gives all members involved a chance to express their concerns and offer their advice. Sometimes specialists are recruited who may lead the discussions to obtain the maximum out of these evaluations.
It must also be clarified that the SWOT and PESTLE studies are not only undertaken at the start of any venture but in fact it is advised that routine re-assessments are carried out for an up-to-date and smooth functioning of the organizations.
The SWOT analysis is a study undertaken by a company or organization to study the framework of the same. The entire functioning of the organization is analyzed by studying it from various perspectives so as to identify possibilities and problems and therefore design their course for the future. The SWOT analysis is a framework which is used to assess a company’s position vis-a-vis competitors in the market by studying and identifying their strengths (S), weaknesses (W), Opportunities (O) and threats (T). Strengths and weakness are internal factors where as opportunities and threats are external. Sometimes the weaknesses are termed as liabilities (L) and SWOT is therefore referred to as SLOT. The SWOT analysis is showcased in a 2X2 grid an example of which is provided below.
A SWOT analysis is a simple but important tool for any business to accurately understand their position in accordance to the conditions of the market and amongst competitors by working through the aforementioned points. The knowledge of SWOT can be used for strategic planning for any business for several reasons which we shall look into.
Firstly, a thorough and honest knowledge of the actual state of the business’ plus points and shortcomings can help companies find the required solutions and if perhaps that is not possible, then at least how to avoid those shortcomings by focusing on their stronger fronts. SWOT is especially useful if practiced at early when planning projects so that the company can be well-prepared on all fronts.
SWOT analysis is beneficial in strategic planning because it requires that people from all departments (of that company) come together and brainstorm. This brings out different perspectives from different individuals and groups and diversity in thoughts can be surprising.
SWOT has a wide range of applications- it can be used for competitive as well as strategic planning. A SWOT study can be undertaken at the time of the start of the company so as to start heads on with a full knowledge of their working which therefore guarantees better results. The same can be used for a yearly re-assessment of their own performance whereby they can judge their position vis-a-vis their previous analysis. The element of surprise, not a desirable element in business ventures, can be done away with.
Since a SWOT study requires that all members of a business take part in it, this activity encourages discussion. This discussion therefore gives all employees a chance to voice their concerns and expectations from the company and gives a fair chance to bring notice to any problems and bring them to light. The same is applicable for new tactics and divergent interests with regard to the company’s works.
The SWOT analysis requires that a large amount of information is processed and synthesised for maximum efficiency of a company or a particular project that it has undertaken. When knowledge is power the knowledge of threats and weaknesses alone is a milestone in dealing with it. Thereby SWOT provides the motivation to upgrade plans and functionality by focusing on attitudes, aptitudes, abilities and skills.
SWOT studies are an effective exercise in team building and teamwork. This fosters collaboration between various functional units which may not interact much otherwise. Since there is also a project manager or leader of sorts that leads these meetings, this helps leaders hone their skills in planning, management and organising activities.
SWOT is a no-cost activity which does not require resources other than insights from various members of the company itself. It helps one understand their business better, cash on their strengths, addresses their flaws and circumvent their threats. As an overall, it helps the business to plan goals and to achieve them effectively.